Property Investment Tips: Invest in a new build

By the resi financial blog team, 14 November 2014

One of the keys to successful investment is a diverse portfolio that will match your financial goals. Whether you are considering your first investment or tallying up quite a number of properties, an off-the-plan or newly-built house could be the boost you need.

Why buy new?

There are many benefits to purchasing in a new development or building a home of your own selection. One of the most apparent is that if you decide to occupy the house later down the track, you can design the house with your future needs in mind. Buying a brand new two or three bedroom house could provide an ideal rental now, and a great place to retire when the time comes.

As with any investment, cash flow is an important thing to consider. Buying a new-build instead of an established home could mean much less maintenance over the short term, as well as efficient and compliant materials used in construction, which should keep your running costs down.

A modern house is also much more attractive to potential tenants than an old house that may be more prone to temperature fluctuations, and other issues associated with older building materials.

Capital gains

Capital gains are a great thing for your portfolio, but why would you want to be elevating someone else's wealth over your own? Instead of buying an established home and paying a market price that includes a lot of capital gains for the seller, buying off the plan will give you a very set cost that only has capital appreciation on the land. Building costs are related to labour and materials, and this is largely fixed when you sign your building contract.

Properties that are bought in new developments may not be near to amenities available in traditional neighbourhoods, which will keep the price down. But as the development progresses, new infrastructure is usually implemented, increasing access to shops, public transport and green open areas. This can increase the value of your property and the amount of rent you can demand in a very short space of time.

Getting in on a development early is essential, as land prices generally increase as later stages are released and people have more confidence in the area. The aforementioned developments in neighbourhood infrastructure also play a part in this. If you are able to, it may pay to buy a few blocks of land in a new development and bank them.

Selling the land you acquired cheaply at the beginning of the development for a higher price when subsequent stages are released can provide the income for building a house or two on the land you have left. Check with the developer to see if there are restrictions on this kind activity, or if you have to build within a certain time period.